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Old 11-20-2015, 12:27 PM   #61
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I agree we should be friendly. But accusations of fraud against someone not obviously fraudulent aren't very friendly. The accusations should be backed up, not casually swatted aside with sarcasm.




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I think we can all agree to disagree and keep it friendly. However sarcasm can make a point.

Clearly you are a fan of Pfau's work. Other's question his motivation. The reasons for questioning have been stated. Feel free to talk about the positives of his work to countermand those statements.

But we don't need to get unfriendly.
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Old 11-20-2015, 01:39 PM   #62
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if you want to slobber all over the guy's shoulder, feel free. He is obviously tainted via funding, so I have no interest in anything he says.

Well the "slobber" part clearly wins the argument, so on that I will concede and bow out.


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Old 11-20-2015, 02:08 PM   #63
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I don't have anything in particular to prove one way or another about Pfau, but when you know what the annuity industry looks like and how they are marketed and sold by folks like Pfau, it doesn't take much to just take a pass on his form of "gospel".

...
Could you elaborate on this? My understanding, as a layperson, is that you look for a good insurance company (likely through the vanguard site), pay them $X and you get so much per month until death beginning immediately, or in a deferred annuity, beginning on a date certain (if you are alive, or if you/spouse in case of joint annuitant). These are the two types that Pfau has espoused, at least in the papers that I've read that were published both before and after he became affiliated with the American College. Seems pretty straightforward, unless I'm missing something? (I'm ignoring guaranty fund issues for this....)

Agree that the Cr*ptastic variable annuities, which are held out as "investment" accounts with an annuity sidecar, are another story entirely--and that the business of marketing/selling those beasts is a travesty.
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Old 11-20-2015, 02:33 PM   #64
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They've all got their products to sell. I am not sure why Pfau gets picked on in particular. How many advisers ever recommend commission and expense free TIPS or I-Bonds even though for some investors they might be the best fit for their risk tolerance and objectives?
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Old 11-20-2015, 02:45 PM   #65
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They've all got their products to sell. I am not sure why Pfau gets picked on in particular. ...
Maybe he's getting 'picked on' in particular in this thread, because the OP asked about him by name?

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Old 11-20-2015, 02:58 PM   #66
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Maybe he's getting 'picked on' in particular in this thread, because the OP asked about him by name?

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He has been picked on in other threads, while advisers associated with mutual funds who recommend mutual funds to the exclusion of all other investment types (not naming any person in particular) do not seem to suffer the same level of scrutiny.
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Old 11-20-2015, 03:49 PM   #67
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Most people on here have a good idea about the issues with annuities of various stripes and have started to criticize Pfau because he has included annuities in his research and has concluded that they are beneficial in some circumstances. I get the feeling that he would be criticized for the conclusion even if he wasn't receiving some funding from the insurance industry. So those that either claim fraud or simply dismiss his papers because they include annuities and come to some conclusions they dislike need to start by arguing why his results or wrong.

Accusations must be backed up by argument and evidence, not just supposition and prejudice against the insurance industry and their products.
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Old 11-20-2015, 03:57 PM   #68
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Most people on here have a good idea about the issues with annuities of various stripes and have started to criticize Pfau because he has included annuities in his research and has concluded that they are beneficial in some circumstances.
Some members may share that view, but i would avoid characterizing all views as just one thing. I do not disagree with the view that annuities may play a supporting role in a portfolio but take issue with his projection of low future equity returns, which he uses to suggest annuities as an alternative. That comes across to me as self-serving.
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Old 11-20-2015, 06:13 PM   #69
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Some members may share that view, but i would avoid characterizing all views as just one thing. I do not disagree with the view that annuities may play a supporting role in a portfolio but take issue with his projection of low future equity returns, which he uses to suggest annuities as an alternative. That comes across to me as self-serving.
....and that's what's been missing from previous comments. Up to now there's been no argument with Pfau's actual results or how he got to them, just unsubstantiated statements of fraud. He has abandoned historical average returns and projected current returns into the future and used historical data to derived the standard deviation. Using these low returns (particularly for bonds) can produce some results that are favorable for annuities. I won't question the calculations used in the peer reviewed publications so it's really an argument about the inputs and assumptions of the model. Pfau could well have used low rates to produce good results with annuities, but he could also objectively believe them to be better numbers for a retiree to use. Without more information we should simply look at the work and critique it objectively and hold our fire on the author's motivation.
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Old 11-20-2015, 06:33 PM   #70
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Pfau is certainly not the only one predicting low bond and equity return rates going forward. Shiller, Bogle and others have made similar predictions for the coming decade and they have logical, math based reasons for their projections.

Bogle's predictions here:
John Bogle says you won't make much money from stocks - MarketWatch

Shiller's here:
The investing golden age may be over: Robert Shiller | Watch the video - Yahoo Finance

We took our pensions as annuities. I don't think the commercial equivalents were quite as good a deal but I do think annuities can have a place in a diversified portfolio. We have our non-COLA pensions matched with a fixed rate mortgage.
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Old 11-20-2015, 07:13 PM   #71
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And more importantly, is it pronounced Wade Pifow, Wade Fow, or Wade Pow?


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Old 11-20-2015, 08:18 PM   #72
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And more importantly, is it pronounced Wade Pifow, Wade Fow, or Wade Pow?
In German, Pfau means "peacock" and is pronounced pfow (rhymes with now).
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Old 11-20-2015, 08:25 PM   #73
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I don't have anything in particular to prove one way or another about Pfau, but when you know what the annuity industry looks like and how they are marketed and sold by folks like Pfau, it doesn't take much to just take a pass on his form of "gospel".

Like Brewer, I may look at annuitizing at some point in the future, but it won't be on the advice of Pfau, but rather would be after reading research from those not in the pocket of the insurance/annuity industry.
Everyone's solution is different and opinion and personal philosophy mean that there's no objective "best" solution to generating retirement income. If you are risk averse you will gravitate to some of Pfau's results and gurus like Bernstein. Other's will follow Bogle's advice, some might just go with a balanced or income fund and some might just keep going like they did in accumulation. There are many paths.....Grasshopper.
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Old 11-20-2015, 09:05 PM   #74
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Everyone's solution is different and opinion and personal philosophy mean that there's no objective "best" solution to generating retirement income. If you are risk averse you will gravitate to some of Pfau's results and gurus like Bernstein. Other's will follow Bogle's advice, some might just go with a balanced or income fund and some might just keep going like they did in accumulation. There are many paths.....Grasshopper.

I agree. I will never have a use for an annuity due to my pension. But after 6 fruitless years of talking money with my GF, we are thinking the best path for her will be a deferred annuity. Probably purchasing in late 50s and drawing between 65- 67. Between it, a modest pension, full social security, and a paid off house I would give her, she will be set month to month the rest of her life.
She has no interest or understanding of withdrawal rates, 4% rule, investment strategies etc. She can run the clock out and not have to worry about finding an old geezer to take care of her. If I outlive her, she can be a kid in candy store blowing everything she has on a month to month basis with this money.


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Old 11-20-2015, 09:33 PM   #75
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He has been picked on in other threads, while advisers associated with mutual funds who recommend mutual funds to the exclusion of all other investment types (not naming any person in particular) do not seem to suffer the same level of scrutiny.
Are you kidding? The posts/threads that criticize brokers and high-fee FAs must number in the thousands, and they can be much more harsh than the treatment Pfau has received.
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Old 11-20-2015, 09:47 PM   #76
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Are you kidding? The posts/threads that criticize brokers and high-fee FAs must number in the thousands, and they can be much more harsh than the treatment Pfau has received.
My post didn't say anything about brokers and high-fee FAs.
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Old 11-20-2015, 10:18 PM   #77
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The argument for SPIA annuities is a lot stronger in a better interest rate environment. It's hard to argue for them in the current environment.

Like others have mentioned - I will continue to re-evaluate my view of SPIA annuities as I go forward... but Pfau seems to play off of fear to pitch them - disregarding historical market returns, and apparently, disregarding current annuity returns.

I'm a fan of the 3 legged stool approach - I have a very small non-COLA pension and some rental income - so my 3rd leg is very short and I'm tilting over... but I can't find a rational argument for purchasing a SPIA in the current rate environment. That said, I'll continue to re-evaluate. But I still don't trust Pfau because he doesn't seem to be considering current interest rates, disregards historical market returns, and seems to be in bed with the annuity insurance companies.

I'm not saying he's a fraud - just saying I don't trust him or agree with him.
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Old 11-20-2015, 11:40 PM   #78
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It would be very interesting to see the personal portfolios and AAs of all these financial gurus. Then we'd see if they practice what they preach. I tend to believe that Bogle's portfolio is just as he describes it.

Me and My Money: Jack Bogle | Reuters
FYI here is a post by Wade Pfau over at Bogleheads that describes his current investment approach and a possible one for the future. Here is alink to the thread.

https://www.bogleheads.org/forum/vie...?f=10&t=175623

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"Re: Is Wade Pfau right about annuities over [bond funds] in a retirement portfolio?
Postby wade » Wed Oct 14, 2015 9:21 pm

I'm 38, and it is hard to say what sort of new financial products will exist in the future. As I'm now I'm a Vanguard investor. But I would like to believe I'd be willing to incorporate income annuities over time. There is the behavioral hurdle of losing those assets from the financial statement, but mortality credits are a very attractive source of additional returns. I'm quite sold on Moshe Milevsky's idea to bring back tontines, as it allows mortality credits to be obtained without using an insurance company."
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Old 11-20-2015, 11:46 PM   #79
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His predisposition towards recommending annuities does make me question his objectivity. Whenever I hear the name Wade Pfau the following song immediately pops into my mind:
Agreed. I think Wade Pfau is a sock puppet of the insurance industry. He has this "study" showing how (I believe it was) 6% withdrawals can often lead to failure of a portfolio. Well no sh**t! You're supposed to take out 4%! He conveniently never talks about what happens later in life when accepting fixed 6% payments with an annuity.
Income annuities only guarantee poverty later in life.
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Old 11-20-2015, 11:51 PM   #80
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FYI here is a post by Wade Pfau over at Bogleheads that describes his current investment approach and a possible one for the future. Here is alink to the thread.

https://www.bogleheads.org/forum/vie...?f=10&t=175623
I thought there were many good points in that thread. Thanks for the link. If we end up spending more of our portfolio than planned, I would consider annuities for longevity insurance when we are older.
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